NICOSIA, Cyprus (AP) — Cyprus is looking to longtime ally Russia for possibly another loan or buyers for its troubled banks as part of a rescue package that would keep the country from going bankrupt, an official said Friday.
Cyprus' prospective bailout creditors — the other 16 eurozone countries and the International Monetary Fund — are meeting Friday to try and hammer out a rescue deal.
The east Mediterranean island of around a million people was initially estimated to need as much as €17 billion ($21.99 billion) — equivalent to the country's entire economic output — most of which would go to save the country's banks, which took huge losses on Greek debt.
But because of doubts that Cyprus could pay back such a sum, the eurozone and IMF are now offering something closer to €10 billion. That means Cyprus would have to scrounge up cash from other sources, such as Russia, or reduce its debt load by other means, such as selling its troubled banks.
Cypriot Finance Minister Michalis Sarris will hold talks in Moscow on Monday to see how Russia can help.
A Cypriot official, who spoke only on condition of anonymity because he's not authorized to discuss the negotiations, said Russia is likely to extend repayment of a €2.5 billion ($3.2 billion) loan it granted Cyprus in late 2011 after the country could no longer tap international markets.
Alternatively, Russia could provide a new loan. Russian buyers will also be sought for Cyprus' top two banks, Bank of Cyprus and Laiki, which were the hardest hit from Greece's debt writedown.
That doesn't mean it will be all smooth sailing for Sarris in Moscow. President Vladimir Putin has said Russia would only consider helping if eurozone countries had a deal ready for Cyprus. Other officials, such as Deputy Prime Minister Igor Shuvalov, have explicitly spoken against lending money to Cyprus.
Cyprus has already accepted a condition by its creditors for an independent audit of its banks, which hold billions in Russian deposits, to soothe primarily German concerns that they launder dirty Russian money.
Another option Cyprus is weighing is to make the sizeable Greek operations of its two largest banks, Bank of Cyprus and Laiki, eligible for rescue cash from Greece's own bailout accord.
Greek Government spokesman Simos Kedikoglou said earlier this week that Athens has received no "specific request" for assistance in recapitalizing Cypriot lenders. But Nobel Laureate Christopher Pissarides, who advises Cypriot President Nicos Anastasiades on economic matters, told Greece's Sky TV on Thursday that he believes a deal would be reached "very soon" that would shave about €2 billion off Cyprus' own bailout needs.